Complaint Under Section 138 NI Act Maintainable Against Dishonour Of Cheques Issued In Pursuance Of Agreement For Sale: SC [Read Judgment]

In Ripudaman Singh vs. Balkrishna, a couple entered into an agreement to sell with the accused, who paid some amount in cash and towards balance, issued two post dated cheques, each in the amount of Rs 25 lakhs. When presented after the due dates, these cheques got dishonoured and legal notice was issued to the accused. As they did not pay the amount, complaint was filed under Section 138 of the Negotiable Instruments Act.

The accused moved the High Court which quashed the complaint holding that cheques had not been issued for creating any liability or debt but for the payment of balance consideration.

In appeal, the Apex court bench comprising of Justice DY Chandrachud and Justice Hemant Gupta observed that admittedly the cheques were issued under and in pursuance of the agreement to sell. Though an agreement to sell does not create any interest in immovable property, it nonetheless constitutes a legally enforceable contract between the parties to it, the court added.

While setting aside the High Court order, the bench said:

"We find ourselves unable to accept the finding of the learned Single Judge of the High Court that the cheques were not issued for creating any liability or debt, but 'only' for the payment of balance consideration and that in consequence, there was no legally enforceable debt or other liability. Admittedly, the cheques were issued under and in pursuance of the agreement to sell. Though it is well settled that an agreement to sell does not create any interest in immoveable property, it nonetheless constitutes a legally enforceable contract between the parties to it. A payment which is made in pursuance of such an agreement is hence a payment made in pursuance of a duly enforceable debt or liability for the purposes of Section 138."

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